Corporate giving coming with more strings attached

This is part of The Globe and Mail’s in-depth look at the evolution of philanthropy. Read more from the serieshere.

Canadian charities are in a double bind: As donations from the business community decline, the biggest corporations are also becoming more strategic about their giving.

Faced with an ever-increasing swell of requests, companies have raised the bar for funding in recent years by focusing on causes that are linked to their business goals or the promotion of their brands. Many would rather sponsor specific projects than write a cheque to pay for a charity’s general operations.

“The core of what drives a charity, the ability to turn on the lights and fund staff and really create the infrastructure that’s needed to drive the programs and services, that is the piece that has tended to be more compromised as a result of the economic downturn,” says Jan Belanger, who oversees an almost $12-million annual donation budget for Great-West Lifeco Inc.(GWO-T22.500.020.09%) and subsidiaries Canada Life and London Life.

Charities say several years of economic uncertainty and financial restraint have caused companies to become increasingly demanding of charities, even as many corporations are allotting less to their charitable budgets.

But for now at least, Canada is not seeing the sort of dramatic cuts to philanthropic giving that have hit charities dependent on Wall Street. According to The New York Times, Citigroup Inc.’s (C-N34.160.391.15%)charitable foundation slashed its giving by 60 per cent last year to a mere $115,000 (U.S.), while the collapse of Lehman Brothers and the disappearance of Merrill Lynch as a standalone entity have left gaping holes in a formerly solid corporate donor base.

Yet with an increasing number of causes competing for funds from Canadian businesses, even larger charities say they are not taking anything for granted. United Way Toronto, for instance, has set a $116-million fundraising goal for 2011, to best the $113.2-million raised last year. While chief executive officer Susan McIsaac believes that goal is achievable, she says business executives seem more cautious this year. “Nobody wanted to overpromise or oversell. There was a tone of caution.”

Distributions of food are shrinking at the Greater Vancouver Food Bank Society because of a drop-off in corporate and individual donations this year. Donations of food from companies have fallen 23 per cent so far this year compared with the same period last year, Ms. Carline says. Cash donations are down 30 per cent.

At the same time, the food bank is paying more for the fresh food it purchases, as well as for energy and gas.

“We’re getting hit from both ends of the spectrum, and it means that we’re constantly cautious and making adjustments on the amount of food we’re able to give out at any one time,” Ms. Carline says.

The Daily Bread Food Bank in Toronto is facing similar problems, with corporate donations down almost 40 per cent so far this year, or about $100,000, says spokeswoman Sarah Anderson.

That drop comes on top of a 40-per-cent decline in individual donations so far this year. The food bank failed to meet its goals for its Thanksgiving food drive, leaving a further $96,000 gap in the budget.

“It kind of adds to the stress, with the fall drive not doing well,” she says. “That’s an indicator that we can expect fundraising in the holiday season is definitely going to be a challenge.”

Assessing the depth of cutbacks in corporate donations is difficult because many privately held businesses don’t disclose details of their giving. According to Statistics Canada, corporate deductions for charitable and other contributions peaked at $2.45-billion in 2008, and dropped 21 per cent to $1.92-billion the following year. They began to recover in 2010, but the economic storms emanating from Europe have brought new uncertainty in 2011.

Other firms, like Canadian Imperial Bank of Commerce,(CM-T75.23-0.32-0.42%) are experimenting with “consumption philanthropy” to bolster their long-standing causes. In 2007, branches began selling CIBC’s Pink Collection, which includes items like travel mugs and dog leashes, to complement the Canadian Breast Cancer Foundation CIBC Run for the Cure.

Many companies are seeking more hands-on involvement by partnering with charities on specific projects, while also providing them with more in-kind donations, such as goods or services, rather than cash.

It’s an “outcome-based era” where donors want to know exactly what their money will achieve, says Denny Young, senior director of development at the Toronto Symphony Orchestra. That means donors prefer to fund something specific like a concert series or an educational program, and they are less likely to simply mail a no-strings-attached cheque once a year.

Experts say it is too soon to predict how many charities will miss their fundraising goals this year. Mike Meadows, senior manager of corporate citizenship at Imagine Canada, a national program to promote charitable giving, says that declines in corporate giving tend to lag downturns by between nine and 15 months because companies are determined to honour existing commitments.

After weathering the recession with stable funding, Big Brothers Big Sisters of Canada is seeing uncertainty in 2011, with some corporate partners warning they will be reducing their contributions, says chief executive officer Bruce MacDonald.

The organization had a number of multiyear funding commitments from corporations that are now coming up for renewal. “It’s now that we’re in the renewal phase that we’re experiencing more challenges,” Mr. MacDonald says.

A longer-term trend of disappearing head offices in Canada has also had an impact, he adds. “If we can’t get to the key decision makers because they live overseas or in the U.S., then it is harder to make a case for Canadian investment.”

Like its peers, Toronto-Dominion Bank (TD-T75.99-0.11-0.14%) has continued to increase its charitable donations since the downturn. Last year, it gave nearly $58-million to community organizations in Canada, the U.S. and the U.K., up from $51 million in the previous year, and it is budgeting for yet another increase for 2012.

Tim Hockey, group head of Canadian banking at TD, is confident the banking sector will remain committed to increasing philanthropy no matter what happens to the economy. Still, as an individual, he admits that he is worried about the potential for another economic downturn.

“You can’t help but feel that if we go into an economic recession, so many of these agencies, so many of our citizens, are going to be hugely impacted by increased unemployment rates or cutbacks in spending by institutions,” Mr. Hockey says. “I’m very worried. … It is no fun to be in a recessionary environment if that is what we are headed into.”

During the last recession, TD focused its efforts on improving financial literacy. It is stepping up funds for those initiatives next year, including funding a United Way program in Toronto that offers financial planning education to single parents, new immigrants and seniors.

Some banks are deliberately choosing causes that resonate globally, such as Royal Bank of Canada’s(RY-T49.64-0.02-0.04%) Blue Water project. “We are very committed to the amount of philanthropy that we do. We don’t consider this to be a fair-weather area of corporate spending,” says Shari Austin, vice-president and head of corporate citizenship. “There are things that we are trying to do to be more efficient with our charitable dollars. The biggest part of that is to focus the money on some specific big-ticket projects.”

Still, there are thousands of charities seeking funding, which leaves many donors feeling overwhelmed, says Greg Thomson, director of research at Toronto-based Charity Intelligence Canada, which helps large donors assess the effectiveness of charitable organizations. Many corporations concluded even before the recent economic downturn that they needed a strategic way to make increasingly complicated choices, Mr. Thomson says.

Bank of Nova Scotia (BNS-T53.03—-%) uses a rigorous process to sift through the roughly 3,000 requests it receives each year. It is anticipating that number will increase over the coming years.

“The year ahead and perhaps the next couple of years are going to be difficult ones, I think, in the fundraising area,” says chief economist Warren Jestin, who also heads the bank’s philanthropy program.

The shift toward donations that can achieve “measurable outcomes” creates new challenges for corporations doing the donating, says Ms. Belanger of Great-West Lifeco.

The Great-West companies commit 1 per cent of pretax profit to charity, averaged over five years. That totalled $11.8-million this year, down slightly from a peak of $12.8-million in 2009.

To do philanthropy well, corporations must take time to understand the needs in their communities, monitor emerging problems and maintain a “constant dialogue” with the organizations with which they partner, Ms. Belanger says. For her, that represents 800 charitable groups that receive funding from her organization.